New Patent Box Regime (Deduction) Rules

The Government of Malta recently published new rules introducing a Patent Box Regime Deduction on Qualifying Intellectual Property (IP).

The deduction applies to qualifying income derived from qualifying intellectual property on or after the 1st January 2019. 

The deduction is calculated as follows:

95% x ((Qualifying expenditure/Total IP expenditure) x Income or Gains derived from qualifying IP)

The new rules refer to a deduction that does not exceed the percentage of prescribed qualifying income i.e. income or gains derived from Qualifying Intellectual Property. Qualifying IP refers to patents already issued, or those where an application for registration is still pending. It also applies to extensions of patent protection.

The entitlement to the deduction covers activities including research, planning, processing, experimenting, testing, devising, designing, development, or similar activity, leading to the creation, development, improvement, or protection of the Qualifying IP. Moreover, the rules stipulate that eligible activities shall be carried out wholly or in part by the beneficiary, solely or together with third parties, or via cost sharing arrangements with third parties, whether or not residing in Malta. 

The beneficiary must request the Patent Box Regime Deduction in computing its income or gains in the tax return.

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